11 5,88 ponts value: SME Company has a debt-equity ratio of.70. Return on assets

Question

11 5,88 ponts value: SME Company has a debt-equity ratio of.70. Return on assets is 8.9 percent, and total equity is $530,000 What is the equity multiplier? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) Equity multiplier What is the return on equity? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Return on equity What is the net income? (Do not round intermediate calculations. Round your answer to the nearest whole number, e.g., 32.) Net income

Explanation / Answer

Debt-equity ratio=Debt/equity

Hence debt=0.7*530,000=$371000

Total assets=Debt+Equity

=(530,000+371000)=$901000

1.equity multiplier=Total assets/Total equity

=(901000/530,000)=1.7

3.ROA=Net income/Total assets

Hence net income=(0.089*901000)=$80189

2.ROE=Net income/Total equity

=(80189/530,000)=15.13%

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